Bottomless Decline

This is one of the most brutal market I have seen over the last 15 years. A large number of growth stocks are down 80% from highs but there is no bottom in sight. The stocks continue declining. This is the kind of market that teaches us the importance of being disciplined in the trading process.

Every day few stocks have to dramatically collapse. Today it’s DraftKing DKNG and Roku. The company came with a wider than expected loss and the stock is getting dumped. The environment has changed.

A $65 stock is trading at $18. There is a reason I never recommend when the stocks are in a downtrend because they keep falling. I know it’s hard to sell a stock at a 15% loss (stop loss) but it’s much better than holding a stock down 70%. See Roku and how it has declined ($500 stock now near $100)

Two Lessons never forget 1. Stop Loss helps you avoid catastrophic damage; and 2. Never buy the dip when the trend is down.

The idea is to lose less and be in the game.

The third rule helps a lot: It’s much better to churn and switch to winning stock than ride a bad stock down to hell. I am not saying anything new but just restating it. Some lessons are hard to comprehend till you personally experience them. I understand the pain and it’s very difficult for everyone.

The Themes in Bull run in 2022

• Oil plays
• Gold/Silver
• Home Away stocks
• Shipping stocks
• Commodities – Coal/Uranium plays

The market is in a messy state and there is nothing much we can do about it other than play defensive and be invested only in Bullish themes.

Trade Sheet:

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers